Legal & General launches £1bn UK Property Income Fund

- New investment platform targeted at European investors looking to take advantage of opportunities in the UK real estate market-

Legal & General Property (“LGP”), one of the largest property fund managers in the UK and a wholly-owned subsidiary of Legal & General Investment Management (“LGIM”), today announces the successful first close of its UK Property Income Fund (the “Fund”).  Subscriptions secured from a number of European institutions have provided the Fund with over £175m of equity to deploy.  With a strong pipeline of investor interest, the Fund is targeting a GAV of £500m in the first half of 2010, through a series of closings, and would be capped at a GAV of £1bn.

LGP will aim to generate returns through careful stock selection; acquiring properties with strong and stable income streams, with selective active asset management opportunities in the medium term.  Target assets will be well-located, with lot sizes between £50m and £100m, in the office, retail and industrial sectors.

Differentiating it from other similar funds is its gearing strategy and fee structure. LGP has developed the Fund with a highly innovative debt structure which enables both geared and ungeared subscriptions, providing investors with flexibility to select their optimal appetite for risk.  It is thought that this is the first property fund offering investors the chance to select their individual level of gearing. The Fund is targeting returns of 15% geared and 10% ungeared per annum, (net of all costs) over a seven-year term.

Furthermore, in line with more ‘private equity’ style funds, the Fund offers exceptional levels of alignment of interest between its management team and investors, with a number of key LGP personnel investing their private capital into the Fund. Performance fees will only be payable on the Fund’s expiry, subject to reaching a predetermined hurdle rate. A proportion of this performance fee will go to the LGP Team working on the fund offering greater alignment of interest and incentivisation for the Fund’s managers.

Charlie Walker, Senior Fund Manager for the UK Property Income Fund comments:

“The level of investor interest and commitment is a strong endorsement of the Fund’s strategy to occupy a relatively untapped area of the market. The larger lot size takes the Fund’s buying requirement beyond much of the current institutional zone, accessing an illiquidity premium clearly evident in today’s market.

“We are in advanced discussions over a number of assets and a wide variety of vendors, with a view to building the portfolio to £1bn over the next two years.”


Michael Barrie, Director of Balanced Funds of Legal & General Property, adds:

“Targeted predominantly at a new pool of investors for LGP, based across Europe, we believe that this innovative gearing structure will enable the Fund to attract a wide variety of investors who are united in their demand for access to long-term value within the UK real estate market.  The high level of support we have already received lays testament to this belief and paves the way for some exciting acquisition opportunities.

“Furthermore, the Fund has been established with the intention to be best in class, not only in terms of performance but also in targeting the highest standards of Corporate Governance, consistent across all LGP funds, as well as ensuring the Fund Managers’ interests are acutely aligned with those of the investors.”

Cushman & Wakefield Corporate Finance are acting as the placement agent.

ENDS.